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Economic Challenges Confronting Honduras: A World Bank Report

The COVID-19 pandemic, hurricanes, and other factors have taken a significant toll on Honduras’ economy. According to a recent report by the World Bank, the country faces substantial economic and social challenges that require urgent policy actions.

Economic Outlook

  • Decline in Real GDP Growth: The report predicts a decline of 9% in real GDP growth for 2020, followed by a slow recovery of 4.5% in 2021.
  • Downturn in Private Consumption and Investment: Private consumption, government consumption, and gross fixed capital investment are expected to decline in 2020.
  • Recovery in Exports and Imports: Exports and imports are expected to recover in 2021, with exports growing at 6.5% and imports at 7%.

Poverty Outlook

  • Increase in Poverty Rate: The poverty rate is expected to increase from 14.8% in 2019 to 18.5% in 2020, mainly due to the pandemic.
  • Rise in Number of People Living Below the Poverty Line: The number of people living below the poverty line is expected to increase by 1.7 million in 2020.

Fiscal and Debt Outlook

  • Deterioration in Fiscal Balance: The fiscal balance is expected to deteriorate from -0.9% of GDP in 2018 to -5.6% in 2020.
  • Increase in Debt-to-GDP Ratio: The debt-to-GDP ratio is expected to increase from 42.2% in 2018 to 55.6% in 2021.

Key Recommendations

  • Targeted Economic and Social Support: Implement targeted and faster disbursing economic and social support to mitigate the impact of the pandemic.
  • Strengthen Resilience to Climate Risks: Strengthen resilience to climate risks through investments in infrastructure, education, and training.
  • Increase Internet Connectivity and Digitalization: Increase internet connectivity and digitalization to capitalize on the digital economy opportunities.

Overall, the report highlights the need for urgent policy actions to address the economic and social challenges faced by Honduras, including supporting vulnerable households, promoting economic recovery, and enhancing fiscal sustainability.